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Online Financial Courses - Process Improvement

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Course 5: Process Improvement

Chapter 5: Lean Thinking

Six Sigma is to variation what Lean is to waste. By removing waste, we make our processes lean - very value added in terms of the customer. Unlike Six Sigma which is driven by highly focused projects, Lean takes a broader view, looking at the entire value stream - all the steps required to produce goods and services that the end user wants, when and where the end user wants it. In the past, we simply thought of the process as stopping once we shipped the product to the customer. Under lean, you have to manage the entire value stream. This value stream is the baseline from which we will apply our lean tools. And some of the tools used in lean are the same as Six Sigma. Thus, Lean and Six Sigma tend to be complimentary of one another.

"Value is a moving finish line and any satisfaction felt at delivering the very best value should be tempered by the knowledge that the race is unending and those who do not improve are losing ground. Getting managers and employees to buy into the concept of high value, long haul management is critical to establish a well-spring of value-driven ideas and actions. Value is a cause that unites and strengthens any organization, supplier or customer, small venture or large, high growth or no growth industry."
- Value Directed Management by Bernard Arogyaswamy and Ron P. Simmons
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Map the Value Stream

A good place to start is to map out the value stream. In order to prepare a value map, you must first identify all entities that are directly involved in the value stream. If you have several entities or domains within your value map, you might want to assign weights to each in relation to their influence or impact across the entire value stream. The Value Map should define overall flows or exchanges between the various entities or domain owners that comprise the value stream. This involves the movement of materials and information across the value stream - from the resource inputs that go into making products and services to the final consumption of the product or service. Once you understand these relationships, you begin to identify problems and challenges that take place in the exchanges throughout the value map.

Most value maps are constructed by following some simple rules:

1. Use ovals for each entity. Try to keep the number of entities to ten or less. You can vary the size of the oval to indicate influence or impact in the value chain.
2. Connector lines between entities should be labeled as to the input or outputs involved. Here are some simple examples:

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Five Lean Principles

Lean is often characterized by the 5 S Principles:

1. Sort - Put things in the proper order and remove those things not required for the process to work.

2. Straighten - Arrange things in such a way that minimal effort is needed between each part of the process.

3. Shine - Keep all parts of the process clean and in good working order to prevent any break downs.

4. Standardize - Maintain all lean principles with any design changes related to the process.

5. Sustain - Make a commitment to following the lean principles in how we manage our processes.

Depending upon the nature of the process, there are the "usual" suspects when it comes to waste:

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Process Modeling

Many of the tools in lean are the same as Design for Six Sigma - things like mistake proofing (poka yoke) and Quality Function Deployment. Lean also uses many of the "fundamental" type tools, such as root cause analysis and brainstorming - not to mention the main-stay tool of value mapping. One of the more serious tools used in lean is process modeling. Process models provide a simulation of how a process works, allowing the user to trigger events and identify possible bottlenecks and inefficiencies within the process. Process models are not easy to build; requiring a computer model of interdependencies between entities, resources, drivers, and other components.
Process models should start with a high level map or diagram of your core process. The SIPOC Method can be used to create a high level diagram of your core process:

Suppliers - All entities involved in providing resources consumed by the process.
Inputs - The actual resources (labor, materials, information, equipment, etc.).
Process - The activities that convert inputs into outputs.
Outputs - Products or services produced and distributed to customers
Customers - All entities, groups, and individuals who are recipients of the outputs.

"The concept of quality management, developed since World War II, does not involve technology, it involves thought. You have to stop thinking about quantity and start thinking about quality. What makes that more difficult is that quality isn’t a convenient list you can consult or even anything you can look at. If people operated on a factual basis, everyone would have adopted a quality method by now. The fact is that quality methods provide better results. Another fact is that people who work in quality companies are happier, better trained, and more dedicated employees. An even bigger fact is that quality is the standard of competition in the global market."
- Thinking About Quality by Lloyd Dobyns and Clare Crawford-Mason
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Lean Life Cycle Methods

Depending upon the organization, there are different life cycle approaches for doing lean. For example, Japanese organizations typically use the Kaizen approach:

1. Identify and clarify the objective
2. Grasp the current situation
3. Visualize the ideal situation
4. Develop targets
5. Create a strategy for kaizen implementation
6. Make a plan - who, what, when
7. Implement
8. Check Effectiveness
9. Document your activity
10. Confirm results

Another approach is 8D (eight disciplines):

1. Use Team Approach
2. Describe the Problem
3. Implement and Verify Interim Actions
4. Identify Potential Causes
5. Choose / Verify Corrective Actions
6. Implement Permanent Corrective Actions
7. Prevent Recurrence
8. Congratulate Your Team

Another basic way of looking at lean is to view it as a continuous program cutting across the entire value stream, following a repetitive method of: Plan (Analyze the process) ? Do (Test your improvement ideas) ? Check (Evaluate test results) ? Act (Adjust and go back to Plan). When coupled with various tools, such as Root Cause Analysis, Poka Yoke, and Quality Function Deployment, lean becomes integrated into all of the work that goes into the value stream. The ultimate goal of managing the value stream is to have a single piece flow where products move from one operational point to another only when needed with the lowest increment in resources consumed.

"The key point to remember is that customers care about and react to the end product that is the sum of all functional products. For example, customers visiting Disney World care little about what goes on behind the scenes to create the magic. A hotel guest should not be concerned with the process that gets the right room clean and ready for a stay. A frequent flyer remembers on-time arrivals, not the fuel load or pilot schedules. Consumers instinctively focus on the ultimate outcome they desire."
- Focused Quality: Managing for Results byHarvey K. Brelin, Kimberly S. Davenport, Lyell P. Jennings and Paul F. Murphy
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Course Summary

Improving performance is not about cutting people. It’s about cutting waste and inefficiency from the process so people can do their jobs better. The tools for process improvement have exploded in recent years thanks to Six Sigma. But even if you don’t have a team of Six Sigma Black Belts, you can still apply many fundamental concepts for improving a process. This can include things like reducing handoffs within a process, eliminating "Re" type activities, and organizing around process flows as opposed to functional silos. Additionally, many of the fundamental tools for improving a process are not overly complicated - things like root cause analysis, affinity diagrams, and brainstorming.

You can also embark on broad approaches to process improvement by using Capability Maturity Models and Lean. Several programs are available for making quality a part of the company’s culture. Examples include the Malcolm Baldridge National Quality Award and ISO 9000. Given the wealth of resources now available, there’s no excuse for any company not to improve its processes.

Quality is now a given for the customer. When people buy products and services, they expect high quality. Voice of the Customer recognizes that customers have silent expectations that you can no longer ignore. Therefore, understanding the voice of the customer is paramount for addressing quality and improving your processes. The road to process improvement must pass through the customer. And as customer expectations rise, the need to improve organizational processes will grow. Process improvement is now a fundamental part of managing any organization and if you fail to improve your processes, then sooner or later you will be forced to do so in order to survive.

"Astute managers at all levels - in all industries - realize that the success of their organizations in today’s world depends upon flexibility and responsiveness in meeting customer needs, achieving ever higher quality levels, a high degree of internal efficiency, and cost effectiveness. The key to success is to maximize value to the customer and successfully implement the changes that make maximum customer value a reality for any organization in any industry." - Breakthrough Process Redesign: New Pathways to Customer Value by Charlene B. Adair and Bruce A. Murray
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Chapter 1: Some Good Starting Points
Chapter 2: Fundamental Tools of the Trade
Chapter 3: Capability Maturity Model (CMM)
Chapter 4: Six Sigma
Chapter 5: Lean Thinking
Chapter 5 points
Map the Value Stream
Five Lean Principles
Process Modeling
Lean Life Cycle Methods
Course Summary

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